There is a change in the federal tax rates every year. In December 2017, the President signed the new tax reform into law. The new tax law is set to make a few changes to the tax code; however, it will not affect the federal tax filing until 2019, and neither will it change the process followed by federal tax calculators. We currently have seven tax brackets, and every single person in the tax bracket is eligible to pay a certain percentage on the taxable income their bracket demands. The federal tax calculator helps individuals in calculating the amount of tax they will have to pay on their earnings. There are changes to the federal tax calculators every year as well, but the main components are constant among all the different calculators. Following is a brief description of the main components of federal tax calculator 2018.

Tax brackets
There are many cases when the tax brackets are confused with tax rates for the federal tax calculator 2018. However, these terms are completely different and cannot be used interchangeably. Each tax bracket has a set amount of income and carries a tax rate that is applicable to that amount. The tax bracket amounts range from 10%-39.6% on the adjusted gross income. In simple words, if the income falls under a certain bracket it will be taxed according to the tax rate of that bracket. As the income grows, you will move to other tax brackets and the tax rate will change accordingly.

Taxable income
Taxable income is an important component of the 2018 federal tax calculator, it refers to the income that can be taxed. There are some incomes that do not come under this category and are not taxed. The number of taxable incomes is a lot higher than those not applicable for any taxes. The incomes that are under the taxable income category are wages, salaries, tips, commissions, bonuses, vacation pay, sick pay, and severance pay. These are only a few major types of taxable incomes, there is a list of about 15 categories of incomes that are taxed.

Adjusted gross income
Most of us are not restricted to having only one source of income. Even if we have a full-time job, there are always secondary avenues of income. Adjusted gross income is a combination of the total gross income and the income from other sources. The taxable income is calculated on the basis of the adjusted gross income. Taxable income is adjusted gross income minus the deductions.

Filing status
It is important to know that a certain amount of taxes paid by you will be returned to you. A filing status will determine the amount you owe in terms of taxes and the amount you will get back. A filing status can also have an impact on the deductions, credits, and exemptions. An individual’s status can be one of the following: Single, Married, Filing Jointly, Head of Household, Married Filing Separately, or Qualifying Widow(er) with Dependent Child. Selecting the status in the federal tax calculator 2018 is an important step as it affects multiple factors. You must select it in the tax refund and the tax reform calculator as well.

Deductions claimed
There are two techniques that can help you in claiming your deductions: claim a standard deduction on your taxable income or file for an itemization of your deductions. This can reduce the taxable income and the amount of tax you owe to the government. You must be aware that due to the tax new reform, there will be a difference in a few deductions. This is important for the tax calculations you will undertake with the federal tax calculator 2018. It is ideal for you to take a look at the difference between the standard and the customized deductions to have a clear idea of which one you wish to choose.

Exemptions claimed
Tax exemptions are an important part of the federal tax calculators as they lower the taxable income on your return. There are a few different types of tax exemptions that an individual can claim:

• Personal exemption
  A personal exemption is an amount that you can exempt from the taxes either for yourself or your dependents. It is important to know that you are not eligible for a personal exemption if you are a dependent.
• Exemptions for a spouse
  In a case where you have filed for a joint return, you are eligible to claim an exemption for your spouse. In case you file separately, then you can only claim an exemption if your partner does not have any gross income, has not filed their own return, and isn’t dependent on any other taxpayer.
• Exemptions for a child
  Even if you file individually or for a joint return, you can claim for the exemption for a dependent. You will, however, have to pass the qualifying child test set by the government.

You must also note that there can be changes in certain exemptions claimed due to the tax reform passed by the President.